College costs
What is financial aid?
Any federal, state, institutional, and private monetary funding and resources to help students and families pay for their college expenses
What is a mutual fund?
A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt
What is a stock?
a stock represents the ownership of a fraction of a corporation
What is a bond?
A bond is a debt instrument where an investor lends money to an entity (like a company or a government) that borrows the funds for a defined period of time at a fixed interest rate.
What does a realistic budget look like?
50/20/30 rule
50 percent of your money goes to necessary expenses (rent, utilities, car payment), 20 percent to savings, and 30 percent to flexible spending
What are four types of college costs/budgets?
Tuition and fees, books and supplies, room and board, and transportation
What are the four reasons people buy mutual funds?
Professional management, diversification, affordability, and liquidity
What is a ticker symbol?
A ticker symbol is an abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market
True or false: bonds do not have an expiration date
False, bonds have an expiration date and that is when the buyer gets their money back; this date is known as their maturity date.
How much money should I have in an emergency fund?
Three to six months of post-tax income
What are the four types of Financial aid? Include an example for each type
Grants (Federal Pell Grant, EOF Grant, Institutional Grants)
Loans (Federal Direct Subsidized Loan, Federal Direct Unsubsidized Loan, Private Student Loan)
Scholarships (Merit/academic, National, State/local, Athletic)
Work study program (Students work on campus jobs, Based on financial need, Used towards educational expenses)
What are the four types of mutual funds?
Money market, bonds, stocks, and target date
True or false: all stock companies are public
False, not all companies are public
There are private companies composed of an individual/family or a small group of investors that have private sources for funding growth
What are two types of bonds types?
Government bonds and corporate bonds
How can you improve your credit rating?
Review and correct any errors on your credit report, Settle your outstanding balances as quickly as you can, Reduce credit utilization to 30% or less, Limit requests for new credit, Keep old accounts open and resolve late payments or other issues
How do you determine financial need?
Cost of Attendance - Expected Family Contribution = Student Financial Need
What is 1 risk and 1 benefit of mutual funds?
Risks: investment risk, securities in a fund can go down in value
Benefits: funds can earn income from dividends on stocks or bonds, the price of the securities in a fund may increase
How do you know whether you are increasing or decrease in your stock value?
If the stock price exceeds what you paid for it, your investment increases in value
If the stock price goes lower than what you paid for it, your investment decreases in value
What is a bond portfolio?
A portfolio is a collection of investments
What is a 401(k)?
A 401(k) is an employer-sponsored account that some businesses offer as a benefit for their employees. It's funded with before-tax dollars that come out of your paycheck, and you don't pay taxes on this money until you start making withdrawals in retirement
How can you minimize college debt?
Pay back money on time, don’t borrow more than you absolutely need, try to first apply for grants and scholarships before loans or work-study
How do you buy and sell mutual funds?
Investors buy mutual fund shares from the fund itself or through a broker for the fund
Mutual fund shares are “redeemable,” meaning investors can sell the shares back to the fund at any time
The fund usually must send you the payment within seven days
What is the difference between a common and preferred stock?
Common stock entitles the owners (stockholders/shareholders) to collect dividends, if the company declares them
Stockholders who purchase preferred stock are usually guaranteed a dividend payment
If a company fails, preferred stockholders are repaid before common stockholders
An important difference between common stock and preferred stock is that the price of the preferred stock tends to be more stable, changing little over time, than that of common stock
What are three pros and three cons for bonds?
Pros: Predictable income, Most bonds pay a stated amount of income every year or half-year in the form of coupons, Investors know exactly how much they will be getting back, Investors know the exact date when the bond will be redeemed, This provides greater security and less risk for the investor
Cons: Actual default – the failure of the issuer to be able to pay the coupons and/or the redemption amount, An increased risk of default resulting in a fall in the bond’s value, Less substantial issuers are more likely to default than more substantial issuers
What is the difference between an account number and a routing number?
The routing number is a nine-digit number that identifies the region where your account was opened
The account number identifies the specific location of the funds backing up the check